Pension crisis deepens as firms shut schemes to existing staff

Rok and Alfred McAlpine close final salary schemes and predict that other companies are about to follow suit.

Thousands of employees in the construction industry are facing the loss of pension benefits after it emerged that at least two contractors have closed their final salary schemes to all staff.

ROK Property Solutions and Alfred McAlpine have told staff on the schemes that they will have to move to a less generous money purchase pension in order to reduce the companies' pension deficits.

The contractors are two of many that have recently closed their final salary schemes to new entrants, but are among the first to close them for existing members.

Incoming Alfred McAlpine chief executive Ian Grice warned that other contractors would soon be forced to follow suit. He said: "We think that the risks and economics of the final salary scheme will make a lot of other people think about such a move. Over the next few years a lot of contractors will consider doing what we have done."

Under accounting changes to be introduced in 2005, pension deficits will have to be made up from shareholders' funds, reducing the value of the company. Construction companies are particularly vulnerable to this because they usually have few capital assets with which to offset the pension liability.

Money purchase schemes effectively transfer some of the investment risk to employees, leaving companies less exposed to deficits caused by falls in the stock market.

A lot of contractors will consider doing what we have done

Ian Grice, Alfred McAlpine

Rok will replace its three existing pensions, two of which are final salary schemes, with a single scheme on 1 October. The 300 people affected will retain the benefits from the contributions they have made already.

Paul Wilkinson, human resources director at Rok, said: "We were faced with what we are going to do with pensions. We came to the conclusion that final salary was not a good fit for us."

Wilkinson added that the new scheme, to be called the Rok plan, would have the benefit of putting blue and white collar employees on an equal footing in their access to the pension.

Alfred McAlpine's final salary scheme will close on 31 July, affecting 1200 staff. It has been making up a deficit on the pension fund of £3.4m a year. The contributions that employees have already made will not be affected, and they will still receive a proportion of their final salary, regardless of when they retire.